Mortgage Broker

8 | spring 2018 cmba-achc.ca CmB magazIne editorialsummary Government and regulators have been clamping down on Canada's housing market, but to what end? By sAmAnthA gAle Trending in the Wrong Direction C ertain trends in the finance and real estate sectors across Canada have become very apparent over the course of the last year. No doubt, with the cost of housing reaching a tipping point for local affordability, the stakes for consumers of real estate, mortgages and finance products are higher than ever before. So how have government and rule makers responded? TrEnd 1: distrust of industry, leading to rule-tightening Rule makers appear to be scrambling to review current regulatory regimes for a myriad of industry professionals, including financial advisers, realtors and mortgage brokers and lenders, with a view to tightening up licensing and regulatory programs. ese measures include caps on investor funds, new conflict rules, fee disclosure, best interest standards and even new regulatory structures. For instance, the B.C. government is now commencing a review of the regulatory structure providing oversight of realtors, less than two years aer removing self-regulation from them. In Ontario, the regulation of syndicated mortgages has rapidly evolved over a short period of time to include new lender disclosure forms, a split between complex and simple syndications, investor caps on complex syndications and a promise that the OSC will take over their regulation. A common message from industry groups is that government and regulators are no longer listening to them, despite these groups providing common-sense feedback that deserves objective evaluation from the decision makers. TrEnd 2: record government spending while trying to curb consumer spending New B20 mortgage rules, implemented in January of this year, which require uninsured borrowers to qualify at their contract rate plus two per cent, are designed to ensure that borrowers do not overspend on housing, and can withstand potential shocks of future interest-rate increases. However, what is puzzling is that governments do not likewise seem concerned with their own excessive spending of public funds. Recent government budgets, including those of the federal government, B.C. and Ontario, recklessly make an unprecedented number of costly promises, all at the taxpayers' expense. ese budgets are clearly designed to win over voters but exhibit no mechanisms to absorb the shocks of having to repay for overspending, particularly when and if the economy takes a downturn. According to economist Jack Mintz: "Politicians are scrambling to pick off voters with various bribes. As the federal and most provincial governments relentlessly increase our debt, they have no time to worry about the inevitable reckoning that will come when their budget plans are blown out of the water by a recession." 1 TrEnd 3: Taxes, Taxes, Taxes! Provincial governments, namely those of Ontario and B.C., are trying to curb demand for housing with housing taxes. In April of 2017, Ontario implemented a 15 per cent tax on the purchase of residential property in the Golden Horseshoe by foreigners. However, all eyes are on B.C., as the provincial government in its 2018 Budget has now implemented a suite of new housing taxes designed to curb housing demand. It has increased the 15 per cent foreign buyers tax to 20 per cent and expanded its applicable geographic area. It has also implemented a hey tax on owners of both vacant and vacation homes under the falsely named speculation tax, which actually fails to tax the act of speculating on housing (see page 34). And it has created a school tax which will be levied against all residential properties, at a rate of 0.2 per cent for the value between $3 million and $4 million, and at a rate of 0.4 per cent for the value exceeding $4 million. Revenue from the school tax will in fact go into general revenue and not be earmarked specifically for schools. e speculation tax has proven to be exceptionally controversial, provoking the ire of many middle-class, long-term owners of vacation homes in areas such as West Kelowna. ese owners certainly do not see themselves as speculators, and have been caught off-guard with what they view as punitive measures for owning a second home. e new school tax presently engenders little sympathy from most. Recently, Andy Yan, director of Simon Fraser University's city- planning program, was reported to have said this tax represents a solution to the "profound concerns about free-riders." Free-riders are those lucky enough to have bought property prior to the recent explosion of housing prices, unlike struggling new buyers who apparently possess no such luck. Yan's solution for seniors who have limited income is to defer their taxes. He considers equity erosion from taxation a new, modern and progressive tax system. However, the implication that owners of more expensive homes are free-riders who have somehow lucked out seriously negates the

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